Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
KOSPI moving in tandem with US futures amid heightening Omicron uncertainty
Dealers at Hana Bank work at a dealing room at the lender's headquarters in Seoul, Friday. Yonhap
By Lee Min-hyung
By Lee Min-hyung
Korea's benchmark KOSPI had been moving in sync with Wall Street's overnight gains or losses, but this long-standing pattern has not been so noticeable following the outbreak of the Omicron variant of COVID-19.
With the new variant emerging as an escalating fear factor on global financial markets, the local stock markets have been aligned in recent days with the ups and downs of U.S. stock futures.
The U.S. futures' influence on the main bourse and junior Kosdaq is expected to widen during the next few weeks as uncertainties triggered by Omicron will emerge as a major risk factor on local equity markets.
As trading hours for the U.S. futures overlap with those of the Korean stock markets, the latter have recently been affected more by the movements of futures, because these reflect more up-to-date and real-time information from the U.S.
Major stock indices in New York plunged more than 2 percent Nov. 26, the last trading day in the U.S. last week, hit hard by mounting Omicron fears. But the KOSPI evaded a drastic fall, edging down only around 0.9 percent Nov. 29, the first trading day in Korea after the Wall Street fall, due to gains from U.S. futures.
The pattern continued throughout this week, leaving stock investors less dependent on the KOSPI's coupling pattern with Wall Street and paying more attention to U.S. futures.
Investors expected the KOSPI to bounce back Nov. 30 in tandem with Wall Street's overnight recovery. The main bourse started off with a gain, but closed with a loss on its worst performance of the year after failing to defend the psychologically-important 2,900-point mark. On the same day, New York futures also reported a drop of more than 1 percent.
The KOSPI also moved in line with the futures indices in the world's largest economy Dec. 1 and 2, affected little by gains and losses from three major U.S. stock indices.
“The decoupling of the KOSPI and Wall Street was sparked by the Omicron-induced financial volatility here and abroad,” a local investment banking industry official said. “Investors are advised to take into account that Korean stocks may not necessarily move in tandem with U.S. major stock indices in the short run until the Omicron uncertainty clears, which will take at least a few weeks.”
Economists highlighted the need for investors to maintain their vigilance on the stock market until the authorities and pharmaceutical firms here and abroad share specific analysis data on the seriousness of the new COVID variant.
“For now, we do not have enough information on the Omicron variant, other than the fact that it has a number of mutations as was noted by the World Health Organization,” Hi Investment & Securities economist Park Sang-hyun said. “It will take more time for researchers to analyze how effective existing vaccines are against the new variant.”
He added, “Now is the time for investors to stay away from excessive fears as well as blind optimism on the stock market due to the Omicron-sparked uncertainty.”